Michael Cullen once called John Key a “rich prick” and said, “I’m proud of the fact that my secondary education was not paid for by the taxpayers of New Zealand but by the farmers of Canterbury and Hawke’s Bay. I ripped them off for five years then, and I shall get stuck into them again in the next few years.” This is the politics of envy, and it is intellectually, morally and philosophically lazy. Michael Cullen was a clever man but for some reason he always went for the lazy option and cheap shot: whacking the “rich”.
Sadly it is what nasty, jealous, spiteful socialists do…often.
A case in point is the latest jealous, useless, nasty socialist Labour politician to have a whack at the wealthy: David Parker. The man was a failure at business, and it shows with his constant and nasty attacks on those who have done well in life.
He has presented the report from Inland Revenue about the wealthiest in our country as a rod with which to beat them and to start pushing the leftist agenda of raising taxes on those he hates.
But the report is terribly flawed, as Damien Grant pointed out in his column yesterday:
None of this matters to a political class seeking cheap political points and the report is replete with ugly undertones: “Our tradies, nurses, school teachers, hospitality workers, hairdressers, cleaners, engineers and small business owners all pay much higher effective tax rates than their wealthier fellow Kiwis.”
Not only is this statement wilfully inflammatory, it is untrue. The wealthy do not pay a lower percentage of tax than nurses. To obtain their magical numbers, Inland Revenue relied on Treasury analysis that adopted a dubious form of income called Haig-Simons.
If you own a farm and the market value of that farm goes up, then this is treated as “economic income”. Haig-Simons does not measure the post-sale value, only the estimated rise in the value of an asset.
If your day job was as an accountant, and you paid tax on that income but not on the increased value of your farm, then your rate of “effective tax” is lower because the income of the rising value of the farm was tax-free.
This type of analysis is so flawed, its only practical use is to demonstrate how degraded and actively political the Treasury has become.
To compound the perception of unfairness, the report explicitly ignores the effect of inflation on their analysis, despite this data being readily available and easy to factor in; which makes the report’s conclusions little better than junk. It seems probable that the conclusion was written before the analysis was undertaken.
The research, and I am being generous in calling it that, also suffers from “survivor bias”, because it excludes past families who had been extremely wealthy but whose riches has been lost, squandered or dissipated.
Stuff
But it gets worse. The report ignored the effect of state subsidies in calculating tax rates:
In a moment of lucidity, the report states an awkward fact: “Further, when considering the tax and transfer system jointly, many individuals in low-income deciles receive more in the form of government cash transfers than they pay in tax.
“If such transfers are netted off tax paid, these individuals will have very low or negative effective tax rates.”
A large percentage of the population receive more from the state in goods and services than they pay in tax. The state spends about $120 billion, or $24,000 per resident. You need to be earning $100,000 a year to cover this and if your household has five people in it, the household needs to be bringing in half a million.
Let’s be honest. The number of citizens who pay more than their “fair share”, if we consider that to be sharing the tax burden equally amongst all of us, is low. There is a small number who do most of the heavy lifting, who pay a huge percentage of the tax burden.
Despite the hysterics of the report, the 311 maligned families paid, according to a graph included in it, roughly $1 billion in tax in the 2021 financial year.
Stuff
If you do what all socialists do the world over, and decide to tax these people heavily, or their capital, then you will find that they simply cease to exist as tax payers in this jurisdiction. This is a situation that Norway has discovered to their chagrin.
The Guardian reported:
A record number of super-rich Norwegians are abandoning Norway for low-tax countries after the centre-left government increased wealth taxes to 1.1 per cent.
More than 30 Norwegian billionaires and multimillionaires left Norway in 2022, according to research by the newspaper Dagens Naeringsliv. This was more than the total number of super-rich people who left the country during the previous 13 years, it added. Even more super-rich individuals are expected to leave this year because of the increase in wealth tax in November, costing the government tens of millions in lost tax receipts.
The Guardian
Norway has lost the equivalent of $90 billion of wealth since they increased their wealth tax. They have learned that people and capital are mobile. But that won’t stop our socialists trying to do the same here, and explaining that it will ‘work this time’ because all the others who have tried this before have done it wrong.
Attacking the “rich” never works: there is a reason they are rich. It is rarely happenstance, and has more to do with being smart, innovative and hard working. They can do all that elsewhere and avoid a draconian regime built on the intellectual laziness of the politics of envy.
And that is what socialists fail to understand, mainly because they have never worked for themselves, paid themselves last after their workers or invested a single cent of their meagre capital resources in their own businesses or ideas. Entrepreneurs and the wealthy back themselves and try to interact with the government as little as possible.
Instead of attacking the “rich”, perhaps a better study would be to try and homogenise and distill their skills into the education curriculum, so that, instead of only 311 wealthy families, we develop thousands of families just like them.
Chance would be a fine thing.
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